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Euro Feels Like a Reluctant Leader

The Euro eked it's way into new high ground in the night session managing to make it to 1.4875.  This was followed by a retreat to the 1.4798, not a very good performance.  Considering the ZEW German Economic Sentiment showed an unexpected drop in optimism, the Euro's behavior was not that bad.  Later there was a US report, the IBD/Tipp Report on Optimism which turned down to 48.7% from an expected 53.1%.  So we lacked good news on both sides of the Atlantic.

Stories abound about the weakness of the dollar in newspapers and on television.  This theme is now past critical mass, and millions of people have placed billions of dollars in gold, commodities, equities and other currencies.  Commodity demand for the most part is responsive to change in price. Most commodities are now being purchased for a period of time, to be held in a commodity index fund, and are not responsive to changes in user demand caused by price change.  Rather, the continuing flow of funds into commodities allows the original commodity bulls, and their sponsors, Goldman Sachs, UBS Bloomberg,  Rogers and others to amass large profits and management fees..  A bubble is being created, and it will continue to expand until the new funds stop.  For traders, now the problem is to identify to life of the bubbles.

The Euro seems like it has become the reluctant leader, voted this position by those who view the dollar as analogous to a slowly melting glacier.  Since the Chinese currency is fixed to the dollar and not available as a new alternative to the dollar, by default we have the Euro.  The market is acting like it does not want this position. 

With the pattern of higher highs and lower lows, the trend could not be more obvious.  The old resistance at the 1.48 level would appear to be the new support.  It is easier to ride a horse in the direction he is going.  Buy the dips.